SATYANARAYANA MODI v. THE CONTROLLER OF ESTATE DUTY, DELID AND RAJASTIIAN, NEW DELm

From time to time Purnabai presented the receipts for renewal when they matured and ol>tained fresh receipts in the joint names of herself and Suryakant. On August, 25, 1955 the receipt ior Rs. 80,931/10/- was encashed and out of the amount of Rs. 86,732/- realized, Rs. 5,000/- were invested in the name of Suryakant in National Savings Certificates. The balance was also deposited alone with a firm in Bombay also in the name of Suryakant alone. The other two receipts were renewed in the joint names of Purnabai and Suryakant. After the death of Purnabai on February 15, 1956, the two receipts were encashed by Suryakant. The Assistant Controller of Estates duty in proc~dings for assessment of estate duty held inter alia that possession and enjoyment of the gifted property was not assumed by the donee to the entire exclusion of A B c D E F G II A B c D E F G H S. MODI V, CONTROLLER, ESTATE I>UIY (Shah, Ag. C.J.) 715 Regai:~ing the · third donor, and on that accoµnt the amount of the two receipts and interest thereon formed part of the estate of Purpab~i and was rl!ceipt for : Rs. liable to estate duty. 80,931/ 10/- the Assi>tant Conttollef' observed that even though• the earlier receipt was discllarged on August 25, 1955 i.e. Wilhln. two years of the death of. J;'uJil)abai and the an'i'ount was invested in the name of Suryakant, by virtue of the provisions of the Estate Duty Act the amount held in the name of Suryakant alone, was for assessment of estate duty liable to be included in the estate of Pumabai. II?' appeal the Centrll'i Board of Revenue confirmed the order. The Board held• that at all ma1'rial ti.mes during the currency of· the fixed deposit Purnab.ai lrnct ihe right te receive the money from the Bank by giving discharge for the s~e and that whenever the Fixed Deposit Receipts matured during the lifetirile of J?urnabai, the receipts were, in fact, discharged by her alone and in the circumstances it coulol. not be said that the pronerty was held by the donee to the entire exclusion of the donor. · 'The Board of Rtvc·nue referred the the High Court of Rajasthan for opinion : follo\Jlling question' to· "Wheth~r on the facts and in the circumstances of the case the sum of Rs, 6,85,193/- was correctly in cluded in the estate of the deceased as property deemed tq pass· on,l'ler death under section 10 of the Estate Duty Act, 1953. ?" · · ·· . . The High Court of Rajasthan answered the question in the affir- · mative. With certificate granted by the High Court this appeal has been preferred. The deposit receipts were renewed from time to time after August 16, 1953 in the joint names of Purnabai and Suryakant till August 25, 1955 under their terms the receipts could be en cashed · by either or the survivor. Even after Purnabai made a gift of the amount represented by the three receipts, she conti nued to obtain the receipts in the joint names, presumably with the object' of not parting with control over those receipts. Counsel for the appellant however contended that the fixed deposit receipts were held by Pumabai in her name as benamidar for Suryakanf Counsel placed strong reliance upon the letters dated July 22, .1953, August 17, 1953 and the terms of the deed of gift dated August 16, 1953. By theletter dated July 22, 1953 the Manager cif the Bank was informed that in respect oUwo out of the . threi,. receipts Purnabai intended to make a ·gift and the- 716 suPREME COURT REPORTS (1970] 1 S CR. Manager was requested that the receipts be made in the joint It was expressly recited m names of Purnabai and Suryakant. the Jetter : "I intend to gift the entire amount of the receipts to my grandson Mr. Suryakant S. Mody hence you are requested to prepare the receipts in joint names as under: "Purnabai Sagarmall Mody and/or Suryakant S. Mody payable to either or survivor." The deed of gift also recites that Purnabai had made a gift of the amount of Rs. 6,26,724/14/- represented by the previous receipts in favour of Suryakant, and that the gift was accepted letter dated by Satyanarayana on behalf of Suryakant. The August 17, 1953 recites that a copy of the deed of declaration of gift was sell! to the Bank for record and information and pro ceeds to state : "Further I would like to state that now Suryakant S. Mody is the sole owner of the above Fixed Deposit Receipts in question till Suryakant S. Mody attains majority the receipts should remain in joint names as it stands now." lt is clear tliat Purnabai desired to make •1 gift of the amount represented by the previous deposit receipts and di(' in fact exe cute a deed of gift. The Bank had notice of the gift deed. Counsel for the appellant contends that Pumabai did everything possible to divest herself of her interest in the money held by her, in deposit with the Bank, and retained no interest therein and that in obtaining renewal of the receipts in the joint names of herself and of Suryakant, she was merely a benamidar ..00 in any event was acting on behalf of Suryakant. Counsel further contends that the Bank having notice of the gift could not have parted with the money except only for the benefit of the minor and by obtaiping renewal of the receipt in favour of the minor Surya kant and Purnabai, the latter retained no possession or enjoyment of the money represented by the receipts. Counsel invited our attention to a decision of the Madras High Court in Imperial Bank of India, Madras v. S. Krishnamurth; and another( 1 ) which Beasely, C.J. speaking for the Court observed that when a Bank having notice that the administrators of the estate of the depositor intended to _pommit a breach of trust by seeking to invest monies contrary to express directions of the will paid out the money, the Bank was liable to make good to the beneficiary (I) A.l.R. 1933 Madras, 628. A B c D E F G H A B c D F II s. MODI V. CONTROLLER, ESTATE DUTY (Shah, Ag. C.J.) 717 the money deposited by the testator. In that case one Naidu had deposited a sum of money with the Imperial Bank of India in fixed deposits. Naidu died having bequeathed by his will the amount deposited to his son Krishnamurthi who was then a minor. Naidu had appointed by his will two persons to be guardians of Krishnamurthi with authority to receive the amount in fixed deposit with the Imperial Bank and to apply the same for the maintenance and education of Krishnamurthi. The guardians obtained from the High Court of Madras grant of letters of administration with copy of the will annexed. After the death of one of the guardians the surviving guardian withdrew the money from the Bank on the pretext that he wanted to invest it on more advantageous terms in house property or some other form of in vestment and misappropiiated it. On attaining the age of majo rity Krishnamurthi sued the Bank. It was held by the High Court that the Bank knowing of the trust created by the will had parted with and delivered the alUount deposited to the administrator who intended to commit a breach of the trust. The learned Chief Justice quoted a passage from Hart's Law of Banking (Edn. 3) at p. 159 that "A banker who receives into his possession moneys of which his customer to his knowledge became the owner in a fiduciary character, contracts the C!uty and to part with them at the mandate of his customer for purposes which are inconsistent with the customer) fiduciary character and duty;' and upheld the claim of Krishnarimrthi. It is unnecessary to consider whether in the present case the investment was made by renewal of frxed deposit receipts after August 16, 1953 for a purpose which the Bank knew was incon sistent with Purnabai's fiduciary character and duty. We are not concerned in . this case to decide whether the Bank could have refused to pay the amount of the renewed deposit receipts if demanded by Purnabai. Whether the amount of deposit re ceipts was liable to estate duty must be determined on the true effect of s. 10 of 'the Estate Duty Act 34 of 1953. Section 10 of that Act provides : "Property taken under any gift, whenever made, shall be deemed to pass on the donor's death to extent that bona fide possession and enjoyment of it was not immediately assumed by the donee and thence forward retained to the entire exclusion of the donor or of any benefit to him by contract or otherwise : Provided that. the property shall not be deemed pass by reason only that it was not, as from the date of the gift, exclusively retained as aforesaid, if by means of the surrender of the reserved benefit or otherwise, it is subsequently enjoyed to the entire exclusion of the 7J8 SUPREME COURT REPORTS (1970] l S.C.R. donor or of any benefit to him for at least two years before the ·death. Provided ........ " The phrascolog.y. of the scttion is somewhat involved. The pur port of !he section is howc\cr clear. The section clearly means if in re•pect of any property which is gifted, bona assumed by the possession and enjoyment is not immediately donee and !henceforward retained by him to the entire exclusion of the donor or of any benefit to hiin therein the property gifted shall not be excluded from the c•talc subject to estate duty. The question which. must be determined therefore is whether in the present case the donce Suryakant did under the deed of gift immediately assume bona fide possession and enjoyment of the fixed deposit receipts gifted to him, and thenceforward tained the same to the entire exclusion of Purnabai or of any benefit arising to her by contract or otherwise. The conduct of Purnabai clearly indicates that she had no intention to part with ·- control O\"eT the proP<:rty; the deposit receipts were obtained in joint names, and Purnallai had authority tC!. withdraw the amount from the Bank, without consulting the guarCli&A Of Suryakant The deposit receipts were renewed on several occasions even after the exewtion of the deed of gift in the joint names of Purnabai and Suryakant. Purnabai alone presented the fixed deposit re caipits for renewal. She could under the terms of the receipts roceive the moneys to the entire exclusion of Suryakant. We are unable to hold, in the circumstances, that bona fide possession and enjoyment of the property gifted was inlroediately assumed by Suryakant and thenceforn'ard retained by him to the entire exc)usion of Purnabai. the right retained by Pumabai to have the receipts made out in her name jointly with Suryakant and the power to recover the amount from !lie Bank without the CIQll· currcnce of Suryakant clearly indicate that she was not excluded, but she l1ad retained impoFtant benefits in herself in the fixed deposit receipts. A. B c D ' It is true that the third receipt was encllsRed during the life.. · G time of Purnabai, and the amount was invested ll! ~ • .aame of Suryakant alone. But the encashment and reinvestment were within two years of the death of Purnabei and. the amounts so reinvested were liable to be included in the estate of Purnabai. The argument that fixc<l deposit receipts had remained ex clusively in the possession of Satyanarayana as guardian of Suryakant and they were obtained by him from Purnaba; for the purpose ,1f renewal is not supported by any evidence. There is H s. MODI V. CONTROLLER, ESTATE DUTY (Shah, Ag. C.J.) • 7 l 9 A dso no evidence that in obtaining the receipts in the joint names Purnabai acted as a guardian of Suryakant nor that she was a benamidar of Suryakaint. We are of the view that the High Court was right in answering the question against the appellant. The appeal fails and is dismissed with costs. B R.K.P.S. Appeal dismissed. LIS Sup C 1/69-2